Archive for Offer In Compromise

Offer In Compromise FAQs

Chuck Woodson, Offer In Compromise

We’re all responsible for paying our fair share of taxes each year. But what happens when the amount that you owe is simply out of reach? What happens if you failed to make payments in a timely manner and your financial circumstances have shifted to the point where your cumulative debt is beyond your ability to pay? In the face of this untenable position, your best option for paying the IRS may be what is known as an Offer in Compromise.

The Goal of the Offer in Compromise

The Offer in Compromise, or OIC, was created to accomplish two goals: it allows American taxpayers who are unable to pay the full amount of their tax debt a way to negotiate a payment that is in keeping with their ability to pay, while at the same time providing the IRS with the ability to collect at least a portion of the amount that is owed to them. The process is neither simple nor fast: it generally takes at least one to two years for both sides to come to an agreement on an amount to be paid.

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What Is The Difference Between An IRS Partial Payment Installment Agreement And An Offer In Compromise?

In very simple terms, a Partial Payment Installment Agreement (PPIA) requires you to give part of what you earn to the IRS, and an Offer in Compromise (OIC) requires you to give part of what you own to the IRS.

Anatomy Of An IRS Partial Payment Installment Plan

The Service generally accepts PPIA applications if the taxpayer has insufficient assets to liquidate and insufficient income for a full payment plan. Here are the specific qualifications per the Internal Revenue Manual:

  • Limited disposable monthly income,
  • Owe over $10,000,
  • File Forms 433 and 9465,
  • No outsanding returns,
  • Not in bankruptcy,
  • No offer in compromise in force, and
  • Limited assets.

Calculate your payment based on your disposable income in Form 433. The IRS expects the maximum, but do not go too high or you risk defaulting on the agreement. The filing fee is $225 ($107 if you elect the direct debit option).

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